Xerox Holdings(US:XRX)2026-01-29 14:02Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $2.03 billion, an increase of approximately 26% in actual currency and 24% in constant currency, primarily due to the acquisitions of Lexmark and ITsavvy. Pro forma revenue declined by 9% [3] - For the full year, revenue reached $7.02 billion, up roughly 13% in actual currency and 12% in constant currency, but declined approximately 8% excluding acquisition benefits. Adjusted loss per share was $0.60, down $1.57 year over year [4] - Free cash flow for Q4 was $184 million, a decrease of $150 million year over year, while for the full year, it was $133 million, which was above the guidance of $107 million [3][27] Business Line Data and Key Metrics Changes - In the Print and Other segment, Q4 equipment revenue was $485 million, up 23% as reported, but down approximately 10% on a pro forma basis. Legacy Xerox equipment revenue declined 14% in constant currency [22][23] - Print post-sale revenue was $1.39 billion, up 25% as reported, but down 9% on a pro forma basis. Excluding reinvention effects, pro forma post-sale revenue declined approximately 5% [23] - IT Solutions revenue increased by 39% year-over-year, reflecting the full inclusion of ITsavvy for the entire quarter. Pro forma gross billings increased by 13% year-over-year [24] Market Data and Key Metrics Changes - The company noted that macroeconomic challenges, including tariffs and increased product costs, continued to impact performance, particularly in the print equipment sales [3][8] - The company is experiencing a firming of demand in the IT solutions sector, with more than $60 million of pipeline creation in 2025 [24] Company Strategy and Development Direction - The company is focused on three strategic priorities: executing reinvention, realizing acquisition benefits, and maintaining balance sheet strength [8] - The integration of Lexmark and ITsavvy is expected to unlock tangible commercial and operational benefits, with a unified sales organization anticipated to enhance market reach [11][12] - The company is also investing in AI capabilities to drive efficiencies and improve customer experience, including the establishment of an AI center of excellence [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about improving business trends despite ongoing macroeconomic headwinds, with expectations for a stronger 2026 [3][4] - The company anticipates that many cost-related headwinds will begin to ease, while new product launches and a unified IT solutions organization will provide meaningful tailwinds [8][71] - Management highlighted the importance of navigating challenges related to memory price increases and their impact on costs across various business lines [5][6] Other Important Information - The company announced a special pro rata distribution of warrants to shareholders, which is seen as a balance sheet-friendly way to reward loyalty and provide bondholders with options to participate in equity [31] - The company plans to use excess free cash flow for debt repayment, with a medium-term target of approximately 3x trailing 12 months EBITDA [28][29] Q&A Session Summary Question: Are orders returning to normal post-government shutdown? - Management indicated that they are seeing growth opportunities in government sectors and that the strategy of acquiring ITsavvy and Lexmark is working to expand their portfolio [34][36] Question: What is the impact of memory prices on the ITsavvy business? - Management clarified that memory price increases are creating uncertainty across all industries, but they are working to help clients navigate these challenges through various service models [36][39] Question: How is the company prioritizing various strategic initiatives amidst challenges? - Management emphasized that the reinvention strategy and acquisitions are progressing well, with a focus on integration and leveraging existing relationships to drive growth [44][47] Question: How does the company protect against potential challenges in IT services? - Management outlined strategies to extend asset life and shift towards software as a service to mitigate risks associated with rising costs [51][55] Question: What are the expectations for finance receivable sales in 2026? - Management expects to reduce finance receivables to about $1 billion by year-end 2026, with a larger portion anticipated in the second half of the year [61]